Having sold for $675,000 a year ago, and with a permit to simply remodel the kitchen and bathrooms in-kind pulled since, the single-family home at 33 Fountain was gutted instead.

And while there might be plans to expand and double to size of the home, and it’s listed on the MLS [for $999,900] with the four bedrooms and baths that don’t yet exist, keep in mind said plans and pictured new framing haven’t been submitted to Planning, much less approved.

A few hours later, an anonymous complaint was filed with the Department of Building Inspection (“Beyond Scope of work. Entire building gutted.”). And yesterday, the sale of 33 Fountain closed escrow with a reported contract price of $1,355,000.
∙ Buyer (And DBI) Beware [SocketSite]

Comments from “Plugged-In” Readers

Reflecting on the extensive early April posts, I would love for someone with more knowledge about the legal and financial ins and outs to share thoughts about how much the LLC who bought at $675k stands to make here. From my perspective, this outright circumvention of the rules and regs that others in the city and neighborhood play by should be handled very harshly by the DBI (or any other agencies with the ability to enforce codes and prevent this sort of flagrant abuse) and they should claw back as much profit as legally allowed.
I would hate to think that spec contractors (especially those from out of town with no ties or seeming regard for the local community) see this sort of outcome and conclude: “Recipe for making money in Noe: buy a fixer, gut it without permits, throw up a framing studs, sell at 100% profit even after paying the measly DBI penalties.”
With full credit to South Park, could this be discovery of the fabled Phase 2?
Phase 1: Collect Underpants
Phase 3: Profits

The owner of a property should be able to do whatever he wants with it as long as he’s not hurting someone else. This outrage at a property owner perceived to be getting away with something is unseemly. Go out and live your life and don’t stew in your own bile worrying that someone, somewhere, is getting ahead.

“gut it without permits”, that didn’t happen. They had some permits. Not as many as they should have, so a penantly was charged.
I don’t think this outcome is going to start a business model of buy-gut-sell like you describe.

Hmm – I’m tempted to draft some plans for my own house and then gut it. That’s a crazy sale price and I’ll definitely be interested to see what this becomes, and ultimately what it sells for once complete.

“”gut it without permits”, that didn’t happen. They had some permits. Not as many as they should have, so a penantly was charged.”
Yes it did. They only had a permit to remodel the kitchen and bathrooms in kind, not to gut the house, frame the attic or move any walls!

“Does this mean you will be taking a sabbatical sparky?”
I have never sold a gutted house, so what would I be taking a sabatical from?
CH,
What do you think kitchens and baths look like on week 2 of a job? They look just like the photos. The attic had stairs up to it, 3 bedrooms and a bathroom before work started. They didn’t frame out an attic that wasn’t already living space. They took the middle bedroom and reframed it into 2 bathrooms. They didn’t have a permit for to do that so there was a fine. The city is clear on their fines. Work without permit is 9x fees, work over the scope of permits is 2x fees. Work over the scope happened here.

The DBI penalty isn’t that much in this case. 9 times the permit fee for demo work is only ~$20,000. If taking down all the walls helps show a buyer what the potential is, then it’s definitely worth it. To do it all legally they’d require new remodeling plans and Planning Department fees, which is a huge headache.

Planning? The stayed in the shell.
DBI penalty? 2x in this case, but the penalty is on what you didn’t permit. So moving the walls adding rooms down, moving the stairs, adding a bathroom, new interior walls, etc.
Did this help anyone see the house better? I don’t think so, it looked better before it was gutted.

“The owner of a property should be able to do whatever he wants with it as long as he’s not hurting someone else.”
Agreed. Of course there are lots of ways you can hurt someone else, like building in such a way that the place is a death trap in a fire. Substandard and dangerous electrical wiring, in fact you could probably make a very long list of ways to build something so it is safe and minimizes the dangers to its future inhabitants and its neighbors. And unfortunately there are a lot of people that would cut corners in an effort to make more money so we need to have some system for making sure buildings are safe. Which leads us to having a DBI system with permits and inspections.

I’m with sparky, I don’t think it’s that big a deal. They paid penalties as they should, it’s not like they expanded without permits. It was a fairly minor issue in my opinion.
To me the real story is the sale price, there’s no way it makes sense that they almost doubled the price in less than a year simply by doing some demo and a bit of framing. Seems like they got the house at a bargain price, and possibly the new buyer over paid. I haven’t seen the place or the records so I could easily be wrong, but I suspect the reported square footage does not include the attic.

Sparky, I meant does the soaring price for Noe fixers make it hard for you to make money buying up buildings and fixing them up?
I know in the past you mentioned that you stopped buying in Noe during the bubble years, are you out again?
What do you do when you can’t make a profit here, do you rehab buildings in other neighborhoods?

“Seems like they got the house at a bargain price, and possibly the new buyer over paid.”
Some of the postings in the original thread for this listing suggested that the original owner was an elderly person who was duped into selling below market.

NVJIm,
I bought into some D5 places before this run up, so I wasn’t looking to buy there now anyway. My projects are a ways off, so we are doing client jobs. When I can’t find a place, don’t like the numbers, or have mine in the abyss of permitting that is what we do. We do some client jobs all the time anyway, so it just changes the mix for me. I don’t do spec. work out the city (I don’t know it well enough), but I do client work out the city.

I really do not see how this will pencil out, paying 1.35m for a place that needs this much work, thats facade alone will eat up quite a bit. Also it need to be expanded to be a Noe 3m redo and will need to be carried for awhile…really dont see much profit on this one at this price

@PN: If someone bought it to live in and has the means/skill to do the work then they shouldnt have paid this much for the place, one would assume if they have he means/skill they should know the market slightly

Researching another project I recently saw the Planning Dept added “removal of more than 75% of interior wall framing” as a Section 311 notification trigger”. Wonder how this affects the buyer? I guess if they intend to increase the envelope then it is irrelevant. Does anyone know more about the 75% rule?

DCR,
Yes 75% removal of interior walls needs 311 notice. This place left the main long hall wall, part of the other side of the hall, and a few short walls on the stair/entry side + a bedroom wall upstairs. It is not going to meet that threshold, so it won’t need 311 for that.
But, I imagine the new buyer is going to do an addition and need a 311 anyway.